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The importance of financial statement analysis and the different types of ratios used to evaluate a company's financial performance. It covers horizontal and vertical analysis, common-size statements, and DuPont analysis. It also discusses liquidity, profitability, leverage, and activity ratios, as well as earnings per share, dividend yield, and price-earnings ratio. useful for anyone interested in understanding financial statements and evaluating a company's financial health.
Typology: Cheat Sheet
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1. Financial Statement Analysis: - Importance: Financial statement evaluation involves comparing a corporation's monetary performance, position, and coins flows for choice-making. - Users of Financial Statements: - Internal: Management, employees. - External: Investors, creditors, analysts, regulatory government. 2. Horizontal Analysis: - Definition: Also called trend evaluation, it compares economic information over one of a kind intervals to perceive traits and modifications. - Formula: ((Current Year - Previous Year) / Previous Year) * a hundred. - Purpose: Identifies boom quotes or declines in financial line items. 3. Vertical Analysis: - Definition: Expresses every line object on a monetary assertion as a percentage of a base object. - Formula: (Individual Item / Base Item) * a hundred. - Purpose: Helps recognize the composition of different additives in terms of a total or base. 4. Common-Size Statements: - Definition: Presents all objects as probabilities of a commonplace base, normally general revenue or general assets. - Purpose: Facilitates contrast between businesses of different sizes. 5. Ratio Analysis:
Conclusion: Financial announcement evaluation is a vital talent in monetary control, permitting stakeholders to make knowledgeable choices. Various tools, which includes horizontal and vertical analysis, ratio evaluation, and DuPont evaluation, provide a complete view of a organisation's monetary fitness. Understanding the constraints and ethical considerations is critical for accurate and accountable financial statement analysis.